Putnam offers twist on portable alpha strategy

Putnam Investments is rolling out its Multi-Alpha Portfolio Strategy, which goes beyond traditional portable alpha strategies to invest in multiple active portfolios to achieve incremental returns. The new strategy will target institutional investors. Much like traditional portable alpha, Putnam will take a small amount of assets from a client and gain nominal exposure to the S&P 500 index by purchasing futures via borrowed assets, said Jeff Knight, CIO of tactical asset allocation at the firm. But rather than taking the remaining assets and investing them in a short-term bond portfolio to beat LIBOR, as with traditional portable alpha strategies, the MAPS will invest the remaining assets in multiple active strategies.

Those multiple active strategies include small-cap value, core and growth; large-cap value, core and growth; tactical asset allocation and global TAA; mortgage-backed securities and asset-backed securities. "The fact that there's a combination of strategies will reduce the volatility. We built this to have zero correlation to beta," Mr. Knight told P&I Daily in an interview. "There's been an increasing request for products that differentiate between alpha and beta" by institutional investors, he said. Putnam will begin aggressively marketing the new strategy to institutions sometime this quarter.